To Be Financially Fit - Live Well Below Your Means

One of the keys to being financially fit is to “live well below your means.”

So, what does that mean?

• You have fewer expenses than income.


• You have less stress (financial and emotional).


• You have excess money to apply to your priorities.

And, what does that look like?

The expenses of someone who’s on track to be financially fit should be broken-down as follows:

10% - Pay your future. Immediately (automatically) put ten percent of your income into retirement. And not only move this money to your retirement account, but invest the money! (More to come on the retirement and investing topics.) [One note – If you have high interest credit card debt or no emergency fund, use this ten percent for those priorities first.]

20% - Fund your priorities. Have the financial means to reach your dreams. Allocate twenty percent of your income for your priorities. This may include paying off your debt, building a down-payment for a home, donations and charities, traveling the world, or reaching early financial independence!

70% - Live your life. Use the final seventy percent of your income to fund your immediate expenses and daily life. This includes any expenses that do not fall into the retirement or priority categories above.

You may not be at this breakdown yet, and that's okay! It will take time, work, and commitment. (Use the Exploit Your Finances, Exploit Your Life process to get started.)

Impossible! I can’t live on only 70% of my income!

I hear you yelling at me. I’m ridiculous and I’m sure your commenting now…but listen, IT'S POSSIBLE.

Yes, this may not be your current reality, but you can make this a goal. Just start the process and see where you end up – even some forward progress is positive, and momentum will build.

Many people live on much less than 70% of their income – while still enjoying their daily life. Both FrugalPortland and Mr. Money Mustache share their savings rates – 50% or more!

My wife and I also strive to only live on only 50% of our income, while funding our priorities of travel and financial freedom. (Most months we allocate more than 50% for our goals!)

So it can be done – it’s just a matter of the effort you’re willing to contribute.

Less Stress

Besides the obvious - more money for priorities - living below your means has other benefits, including lowering your stress level.

If you’re spending less money than you make, then you don’t need to stress out about a little financial bump in the road. For example, did you remember to budget for the twice-a-year car insurance bill (surprise!)? You can sail right over this immediate-cash-need and make up for it next month – because you have extra money!

You have a 20% cushion for those emergencies. No stress here! (Remember, forget about the 10% toward retirement, this is a must!)

You can lower other stress too - work, relationships, time.  With financial control, you can sleep better at night and focus more energy on the other stress triggers.

You’ll Be…

Following the sage advice of “living well below your means” will bring you financial success that some dream impossible.

You’ll be different from those people…

You’ll be setting a foundation for retirement (with your 10%), you’ll be enjoying life and reaching your priorities (with your 20%), and you won’t stress about your daily expenses (with your 70%).

You’ll be comfortable, financially and emotionally.

You’ll ignore the small financial hurdles and setbacks.

You’ll feel positive about your financial future.

And, you’ll have started on your path to being financially fit!

Do you currently live below your means? By how much?

How to Refocus After Ignoring Your Budget

Life can easily get in the way of our financial priorities.

A busy month can turn into two busy months. Soon we’ve ignored our budget for too long to continue to keep track of all of our purchases in our head. We stress about it. We talk about getting back on track. We have only good intentions, but it’s not enough.

Don't worry! We all mess up. We all have times (days and months) where we stray from our financial path. But this doesn’t have to stop us from achieving our goals.

When you find yourself in a similar situation, one where you’ve reverted to (or created) a bad money habit, don’t beat yourself up or freak out and ignore the problem. Instead, take a deep breath, revisit priorities, revise your cash flow, and start again.

Deep Breath

Relax! You’re not alone. You’re not an anomaly because you can’t follow a budget or can’t find time for your money – everybody does this!

The worst thing you can do is start to shut down. Begin to not care about your finances or your goals. Start to ignore, instead of fix, your habits.

Take a deep breath. Realize that you have control of your finances, they don’t control you. Now start taking the steps necessary to show your dominance over your money.

Revisit Priorities

You wouldn’t be working toward your goals, if you hadn’t prioritized what was important in your life and in your finances. (If you really don’t have financial priorities, visit the first step of Exploit Your Finances.)

Revisit these priorities.

Do you still feel passionately about your original goals? Make sure you care enough about them that you can blame them, get back on track, and change your behavior. Remind yourself why you’re working so hard.

Maybe your priorities look different. Well, change them. Find ones that are more important. You may have slacked on your budget, because you weren’t craving the end result.

Revise Cash Flow

Depending on the outcome from revisiting your priorities, you may need to make some changes.

If your goals are the same, but your budget just doesn’t allow for flexibility in your daily life, make sure to consider this. A healthy financial life is about balancing fun now and balancing fun later. Without current happiness and enjoyment, you will not be able to achieve results in the long-run.

If your goals have changed, redo your cash flow to account for your new desires.

You may not need to make any changes to your monthly finances. You may have just needed the reminder of why you review your finances monthly. The “oh yeah” will be enough to jump-start your motivation.

Start Again

Look at this as a fresh start.

Don’t look back and have regrets. There’s nothing you can do about your prior mistakes. Rather, take accountability of your next decisions.

You can do this! You can exploit your finances and exploit your life.

And, whenever you have a future indiscretion…deep breath, revisit priorities, revise cash flow, and start again.

How do you refocus and continue down your path toward exploiting life?

Exploit Your Finances, Exploit Your Life!, Step Three – Exploit YourCash Flow

Below is part three of a four step series on how to go about Exploiting Your Finances, Exploiting Your Life! Start here - Unexploited Finances.

Now the fun starts!

Now you get to BLAME your priorities and exploit your finances!

Exploit Your Income

Cutting your expenses is still the default solution to find money for your goals, but it doesn't have to be the only solution.  How about your income?!

This may be the time for you to ask about that raise at work. Go in with your accomplishments, what you bring, and why you deserve a raise!

No opportunity for a raise...have you looked at the job market lately? You should always keep your eyes open! If you're not watching for it, your ideal job may pass you by. You may have also boosted your current skills since your last job search. (Don't forget to update your LinkedIn profile.) Go ahead, take a look. Blame it on your priorities!

If time is on your side, just not the income, there is also the possibility of a part-time job or a side business. There are lots of opportunities to make more money, it's just a matter of having a reason! Priorities = Reason.

Adding income is a great tool for exploiting your finances because this money hasn't already been allocated. Fresh money! You can just shovel it into your goals!

Exploit Your Expenses

Okay, now it's time to look at those bills.

After your cash flow statement work in Step Two, Current Finances, you have a starting point for your current budget. So how does it look?

Does it look pretty slim?

Do you already cook your meals at home and cut out the cable bill years ago?

Write down your priorities from Step One, Priorities. With this list next to you, go through your expenses - one by one. What's more important?

Is the daily lunch more important then getting your time back?

Is the cable bill more important then your gap year? (You watch all of your shows on Netflix and Hulu anyway.)

What's left?

You may not be able to cut expenses out if they're all reoccurring debt payments or rent payments (student loan, car loan, credit card debt, rent, etc). If this is the case, look at whether you really need these items. Take a BIG step back. We're making drastic changes here, we're exploiting!

Do you really need two cars? Can you move to a lower rent apartment?

These are painful decisions. But that's where we exploit our finances! Blame your priorities! Is your priority to be debt free? Well...selling the car can not only reduce your current debt, but also remove a monthly payment! You don't have to go car free, get a used car. One that fits your new goals!

(After my last car and paying off all of my debt, I promised myself that I'll never take another loan out on a car!)

If friends start giving you a hard time about your 'used' car, say "I could have a new car if I wanted, but I have this goal to be debt free"...(priority blamed!).

The 'extra' monthly money can go towards the student debt, paying it off early! And so on, and so on. Amazing!

Make sure you don't cut everything out though. Exploiting life means that you enjoy every single day. If having that morning latte is about the best thing that's ever happened to you on a Monday morning, then keep it!

Keep items that make you happy, remove items that are just filler!

Blame Game

Have fun with the "blame." Make it a game!

What can I change and blame on my priorities?

Your family and friends will understand and soon everyone will be trying to help you meet your goals!

Using your priorities as scapegoats can have positive side effects - one of which is a conversation starter.

When you decline the next lunch out and blame your priority, coworkers and friends will ask you about it. You can share why being debt free, gaining your time back, and/or traveling the world is important to you. They may even be inspired and start working on their own priorities!

Daily Life

As mentioned in Step One, Priorities, talk about your priorities regularly! Don't be shy. This will help set it in your daily routine! This will help keep you focused! This will help you apply your priorities to all of your financial decisions!

You may still feel uncomfortable talking about finances with strangers. Money is still a taboo discussion in society today, but do it anyway! Showing that you're comfortable with your money is an example of you managing your finances! Those individuals who are uncomfortable talking about money are usually managed by their finances. (I'm not saying discuss your huge salary, no one will want to talk to you...ever. I am saying discuss your financial goals and how you plan to meet them!)

Blame, blame, blame! Use your priorities to exploit your finances!

Get ready to Exploit Your Finances, Exploit Your Life!

Join us in the Personal Finance Revolution!

Are you using your priorities as a tool to review your cash flow? How are you exploiting your cash flow?

There Are Only Two Ways to Improve Your Cash Flow

You want more money.

You want to increase your monthly income.

You want to be cash flow positive.

Maybe it’s to pay off your debt (or stop going into debt). Maybe it’s to make a substantial donation to a charity. Or maybe it’s to travel South America for a year.

So, you read books on making money. You read blogs for the secret access to money. You look for the tip that will make you the most money. You study, study, study. You become an expert on finances. You start spouting all of the potential ways to get rich. But you still haven’t added any dollars to your pocket.

I’ll save you some time...and hopefully get your cash flow to a positive state.

If you really want to improve your cash flow, there are only two ways to do it.

• Earn more money.


• Spend less money.

Two ways – that’s it.

I know. Probably not what you were looking for, but it’s true. And, until you can accept that there are only these two ways – and you start acting upon one (or both) of these methods – you’ll always be looking for the secret sauce.

Earn more money.

The first way to increase your cash flow is to earn more money.

Don’t read about it. Go do it. (The secret sauce you've been looking for – action.)

Determine if you’re maximizing your potential at your day job. Is there another role or a promotion that you can strive for? What steps are needed to get the raise?

Maxed out on the day job, how about a night job? Is there part-time work where you can make some additional money?

Interested in starting your own business – an option if you already have a strong interest or skill in a subject, otherwise you’re back to reading and not acting.

How about weekend work?

Yes, it sucks. Working two jobs is exhausting. It’s boring and hard. You're going to miss your favorite TV shows. But you can’t magically conjure up money. You need to work for it.

If you’re not willing to earn more, then…

Spend less money.

The second option for increasing your cash flow is to spend less money.

Nobody chooses this by default right? Well, maybe…

If you like (only) working 40 hours a week and you’d rather have your evenings and weekends to yourself, then your best option is to minimize your outflows.

Cutting your expenses also requires action, so make the first move.

Have you reviewed your current expenses lately? Are you spending on frivolous purchases? Are you buying to be trendy?

If yes, stop wasting your money.

Have you selected the best company/product for the best prices available? Do you have a budget and stick to your budget? Do you review your budget monthly?

If no, build better habits.

You’ll be amazed at how much money you can save by just being aware of your expenses. You’ll question every purchase – “Really, this is where I want to spend my $20? What a waste of money!”

The secret is out - there are only two ways to improve your cash flow.

Earn more or spend less.

Now go. Act! (And spread the word…)

How have you tried to improve your cash flow? Are you taking action? Or are you hesitating and making excuses?